Global Payroll Management: How to Efficiently Manage International Payroll

Workforce is international, and businesses that limit themselves to offline local professionals are missing out on a ton of opportunities. The new article talks about why global payroll management should be considered seriously even by SMBs. Read on to understand how you implement it in your business.

What is Global Payroll Management?

When a business ventures out of its home country, it is forced to manage paychecks in every country where it is present and has employees and/or contractors. Global payroll management is a system of practices that helps businesses distribute money and benefits overseas among its remote workers. Global payroll lets companies standardize and streamline their payroll operations so businesses can stay compliant across multiple jurisdictions.

Key Objectives of International Payroll Management

Companies and organizations that recruit employees and contractors outside of their home countries require a different approach to payroll management that stands up to major challenges.

• Global compliance. Once a company enters the international market, it becomes subject to control of multiple tax regulating bodies at home and in every foreign country where it hires contractors and workforce. For example, a country’s minimum wage is a requirement you need to comply with when hiring abroad. Another aspect to consider is agency for tax payment. Who is to pay tax off of a paycheck, you or the worker? It is different for every country.
• Workforce data in one place. Having all data regarding any one employee, whether at home or abroad, is necessary. Global companies are obliged to report to local and foreign tax authorities. However, with disorganized payroll operations, where partially money is paid in gray schemes, it becomes nearly impossible to keep everything regarding payroll in order.
• Unforeseen costs. One thing that is difficult to see when managing global payroll is opportunities for cost reduction. Unless there is an automated payroll software that reduces risks and offers a solution that facilitates payment globally, traditional bookkeeping may not be as accurate and insightful.

Real costs behind global payroll

Compliance costs. The actual amount of investment required to stay compliant across multiple jurisdictions tends to surprise company leaders that go global. Not only are we talking about basic costs associated with adapting payroll systems, but also about errors in payroll, e.g. overpayments or underpayments.

Exchange rate costs. There are areas in the world where the exchange rate is highly unstable, influenced strongly by economic and political factors. The everchanging difference can complicate payroll management enough, yet unforeseen local currency value fluctuations contribute to a whole new level of complexity.

Maintenance costs. How much does a single payroll case cost? Literally, how many hours and specialists it takes to forward a sum of money? Chances are, the collective effort of your Finance and Accounting as well as Legal teams costs more than is being sent! When going global, companies find more resources than necessary allocated to teams facilitating money transfers.

Technology and Automation in Global Payroll Management

If traditional payroll is full of complicated processes, global payroll takes it to a whole new level. There are more countries to manage payroll for which means a larger number of reports to make and of regulations to comply with. This is precisely why automation is a real leverage for companies that want to stay successful being an international business. Indeed, a software that manages payroll operations for you is a sure way to save money, time and resources than in the case of a traditional manual approach.

The key tool in automation is a third-party software that will perform complex payroll tasks on its side, leaving you with a more efficient and compliant payroll procedure. Unlike standard automation, which focuses on basic operations like payroll calculation, global payroll automation entails managing various regulations across jurisdictions. Additionally, most software platforms allow integration with current HR systems to fit in with expense management, time and attendance systems, etc.

How to choose the right global payroll management provider

There are several factors that should be considered when choosing a payroll provider. It is important that a company compares several options in the market based on the following criteria. After all, any software is a third-party between the company and its employee, and the provider may greatly influence the overall experience that employees may have with the company as their employer.

Implementation. The time to go live may not be 15 minutes, but it needs to be doable within a reasonable period of time. Asking the provider upfront how much time they need to roll out their software for your specific needs is a necessary step. What documents are they going to request? How long does verification and any other processes take? Finding out answers for these questions is necessary to make the right decision.

Scalability. Once a company goes global, it is likely to keep on growing and conquering new markets. Finding a new solution for every upgrade is difficult and costly. That’s why you need to find out as much as you can about the provider’s expertise in SMBs, Mid-market and Enterprise clients. It’s likely that the provider has a selection of cases or success stories from other clients of different caliber.

User experience. One of the goals of global payroll management software is to make the process as user-friendly as possible. When a software requires extensive expertise and or hours-long onboarding, it may not be a good choice. An optimal software should be intuitive and operable by only a handful of people.

It is easy to forget that a software platform has two receiving ends. On the one hand, it is the company that employs it. Its selection criteria are related to compliance and cutting costs. And on the other hand, there are employees whose interest is to receive money as fast as possible and to be able to declare the income earned with a foreign employer. So you need to assess what software offers to both you and your foreign workers.

Reporting. Whether you manage global payroll manually in house or delegate the process to a third party, be it a software or an EOR, when it comes to reporting, it is you who will need to report. A software you end up with should provide quality documentation for every single operation performed through it. What’s more, it should offer a clear export/import functionality so any documentation, whenever requested, is only a click away.

Compliance. Though listed last, it is the most important criteria to consider when choosing a provider. Again, the team that develops the software is most likely to have a selection of cases that show its expertise and geographical presence. Compare their list with yours and evaluate their prospects. This stands close to scalability In a sense that launching a software per country is expensive and difficult. So it is better to check the software’s potential coverage upfront.

Integrationcapabilities. Global payroll software becomes all the more pleasant to use if it correlates with your existing software in place. A software should be able to integrate as seamlessly as possible into your existing ecosystem. This feature may not be as necessary for SMBs that hire freelancers abroad. Yet it is vital for larger businesses that hire full-fledged employees.

A global payroll management solution in action

In today’s globalized world, there are multiple companies that help establish payroll operations with contractors and employees overseas. They differ in scale, price and functionality. Yet the principle remains the same across options. We’ll use EasyStaff as an example here to explain what a global payroll management does for a business.

EasyStaff is a freelancer management system that handles both payroll and occasional transfers to freelancers. Clients register in EasyStaff, and the process requires the bare minimum of documents to verify the client. Once the verification process is complete, the company can onboard its freelancers and employees as recipients of money.

As a Lithuanian business, EasyStaff is able to work with a network of European banks and protects its clients from risks associated with payroll. The platform has served hundreds of businesses, both SMB and Enterprise. The solution is scalable and it adapts to any business size and turnover. For example, the commission rate may lower to 4% once the turnover reaches $ 50K+.

Regarding closing documents, EasyStaff provides legal and fully compliant reasons for payment. Namely, the client is given a funding invoice and a second invoice after the funds are sent to recipients. Both these invoices mention EasyStaff as the recipient, not the actual person hired for work. Also, the client is also offered a contract to underpin the relationship between the client and EasyStaff. These documents are sufficient to cover any financial operations through EasyStaff.

Global payroll: trends and challenges

Global payroll is more than a new form of payroll. It is the future of work in the world that is globalized and connected. It has become a new normal that your accountant manages not only local workers but also foreign employees and freelancers. Therefore, the field is actively developing to meet as many needs as possible. The leading trends in global payroll are discussed below and should be considered when choosing a provider.

Cloud-based solutions. Cloud-based programs make payroll management much easier and more affordable than traditional hardware solutions. Paying to access a virtual solution without the need to establish infrastructure helps avoid the technical burden. Cloud-based solutions are also highly scalable and require little to no maintenance on behalf of the end user.

Multiple payroll methods. Your HR brand is directly influenced by how you pay for people’s work. Is it always on time? Can you be flexible and lay slightly ahead of time or right after a task is complete? These functions are increasingly offered by providers, where they allow for variations in payroll schedules and even give room to occasional one-off payments.

Addressing risks of compliance. The reason why global payroll management services exist is because they are able to address compliance issues on behalf of their clients and pull their clients’ transfers through any jurisdiction. The trend is to offer documentation that satisfies any tax authority. Behind any platform, there is a Legal department that monitors law changes regarding payroll. Some services, such as EasyStaff, provide closing documents for both parties, taking care of freelancers and employees as well.

Focus on integration. Ecosystem is what any software is trying to build around it’s users. Such services that are tailored specifically for the payroll aspect are aimed at being highly compatible with the existing services that a client may have in place already.

Efficient Global Payroll Management. 5 Major Takeaways

• Global Payroll Management is the new normal in the globalized and connected world of today. Hiring abroad for expertise or lower hourly rates is what any business, including small- and medium-sized companies, is likely to turn to at some point.
• Once a company goes global, it becomes exposed to international tax regulation control. So when choosing between an inhouse accounting team and a cloud-based SaaS, you need to guide yourself with the level of compliance that the solution can provide. An accountant is prone to human error, whereas a software is designed to eliminate errors while maximizing the amount of operations it can facilitate for a company.
• When choosing a software to take care of your global payroll, you need to pay close attention to several factors at the onset. The factors are scalability and compliance. If a software is scalable, it will match the company’s size however large it grows. Likewise, it will be able to support payroll operations even if the company grows smaller. Compliance is the fundamental feature that a payroll software can offer. If a company is compliant, it is optimized for smart payroll operations free of hidden costs and potential fines.
• One such solution is EasyStaff. As a European company, it has access to world-wide banking networks that can forward a company’s payments to anywhere in the world. EasyStaff positions itself as the contractor on a B2B contract, so its clients work with a B2B partner rather than an individual. Such positioning allows EasyStaff to keep its clients safe and their operations compliant.
• The future of global payroll management is in cloud-based solutions and multiple payment options within a single platform. Cloud-based solutions let users save resources on establishing and supporting hardware for global payroll. Multiple payment options are going to include not only multi-currency options but also multi-medium options, such as fiat money and crypto currency. For example, in EasyStaff users can top up their balance with crypto currency and even pay with it to their contractors.